John Carney is starting a list of economists who botched the housing/financial crisis, and his first victim is Cato’s Alan Reynolds. I feel bad for Reynolds, because when you read the “shocking” quotes that Carney reproduces, I totally understand why a free market guy would say those things at the time. (Incidentally, this is why libertarian economists almost have no choice* but to embrace Austrian business cycle theory: If you don’t think the Fed caused an unsustainable boom, then it really is inexplicable why everything blew up like it did. It’s not like the government raised taxes or imposed price controls in early 2007.) I just hope nobody points Carney to the second-last paragraph of this piece. *whistling*

It’s not great, but the below video has some embarrassing predictions by Bush Administration people, as well as Dubya himself. “Diablo” at Carney’s blog posted the link.

* Incidentally, I recognize that a critic of unregulated markets would find my statement to be hilarious, and serve as proof that free market economists are ideologues. So, for the record, I will admit that economists who were completely stunned by how bad the credit markets screwed up, should first consider the possibility that decentralized markets don’t work very well. If you still think there is way too much evidence against that position, then you need to find some other way to explain what happened, and I submit the best explanation is the Fed.